Ford Australia posts biggest annual loss

The local arm of the blue oval has bled red ink in 2011, announcing a $290 million post-tax loss that is Ford Australia’s biggest annual deficit on record.

Ford Australia’s 2011 loss is greater than the $274 million loss registered in 2008 during the global financial crisis, but follows two consecutive years of relatively modest profits.

The company’s “underlying” net operating loss was $78 million for 2011, though the total loss was blown out by a “one off” $212 million tax impairment that includes tax losses for 2011 as well as previous negative financial years where tax losses were deferred.

Ford Australia admits plummeting sales of its Falcon large car contributed to the net operating loss from revenue of $2.8 billion for 2011 – down on 2010 revenue of $3.3b – but also blamed the financial result on supply problems and costs incurred from 2011 changes that shed about 250 staff from the Broadmeadows workforce and reduced daily production output from 260 to 209 vehicles.

“The operating loss is primarily explained by one-off costs that were associated with the restructuring of our business,” said Ford Australia’s chief financial officer, Mark Rearick. “They also reflect a continuing decline in the sales of large vehicles and were significantly affected by the Thai floods.

“2011 was clearly a challenging year for the industry and clearly challenging for Ford as we did face significant changes in segmentation of customer preferences.

“The reduction in sales volumes and revenue were partially the result of the industry-wide decline in the sales of large cars. We were able to partially offset that through increased sales in small and medium cars within Ford.

Sales of the locally built Ford Falcon continue to decline dramatically, with the latest industry figures suggesting the famous nameplate is heading for a third consecutive year of record falls.

Ford Falcon sales dropped 36.5 per cent to 18,741 units in 2011. The large car is currently averaging about 1100 sales per month up to April 2012. If that trend continues, Ford Australia would sell fewer than 13,500 Falcons this year.

The company is pinning hopes on two new variants – the EcoLPi (LPG) and EcoBoost four-cylinder turbo petrol – that bring new levels of fuel efficiency for the Falcon.

Taxpayer money, from the federal government’s New Car Plan, accounts for $34m of that sum, which is being put towards 2014 updates for the Falcon and Territory.

Ford Australia says “other income” of $102m was generated mostly from the federal government’s Automotive Transformation Scheme, but says it accounted for only 3.6 per cent of the company’s 2011 revenue.

Ford Australia president Bob Graziano said 2012 would be another challenging year for the company, and that it was striving to be profitable across its product range.

“Importantly, we’ve recently introduced the Ford Falcon EcoBoost that will also open doors to those fleets or governments who have a blanket four-cylinder [engine] only policy.”

Graziano said the company couldn’t predict when it could return its financial results to the black, and couldn’t guarantee that further changes to local production wouldn’t be made after its 2011 restructure to lower production volume to match local demand.

“The Territory continues to perform well this year and we’ve just launched the EcoBoost. Our intent is to continue focusing on products coming out of the plant here on the back of technologies we’ve now launched as part of the $232 million investment made in that [large vehicle] platform.

“I can’t here and guarantee anything [in terms of production changes]. What I can tell you is that we’re continuing to talk about products we have on the back of what customers are asking for, which is more fuel efficient vehicles. That’s a key want, particularly in that large-car segment.”

Ford Australia says it has continued to invest, with $282 million in 2011 allocated across research, development and facilities for local product programs as well as global product programs such as the Ford Ranger ute. The company says Ford’s total investment in Australia over the past five years has exceeded $1.7 billion.